Commercial banks denied to provide loan of Rs50 billion to PHPL – Research Snipers

Commercial banks denied to provide loan of Rs50 billion to PHPL

Pakistan’s commercial banks denied providing a loan of Rs50 billion to Power Holding Private Limited (PHPL) in order to reduce the circular debt. The interim government was unable to fetch Rs50 billion for energy companies as banks have shown the unwillingness to provide further credit.

The energy supply chain is glooming, it would affect the energy generation as a whole as Pakistan’s largest oil marketing company, Pakistan State Oil (PSO) is facing financial problems as its receivables inflate to Rs330 billion.

The commercial banks are reluctant to provide loan amid heavy borrowing during the last five years of previous PML-N government. During the last two months, only the government borrowed Rs180 billion from commercial banks in order to ensure smooth energy supply and reduce the ballooning circular debt.

The previous government also imposed surcharges on consumers for the cost of inefficiency and electricity theft.

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Obtaining a loan from commercial banks was approved during the meeting of Economic Coordination Committee (ECC) in May, Ministry of Energy (Power Division) recommended Rs50 billion loan from commercial banks, and this would be managed by PHPL.

In a fresh episode over the approval, a senior government official said the government couldn’t initiate the approved plan because the commercial banks are unwilling to provide more financial support to PHPL, which is already burdened by debts.

The Ministry of Finance formed a syndicate of banks to raise Rs50 billion, but two banks pulled out from the syndicate later, the banks said, the current PHPL’s debt is touching Rs550 billion which is huge, and providing more loan on top of that is not feasible for banks, he added.

According to the official, the Ministry of Finance was in talks with another group of banks to seal the deal but that wasn’t either fruitful. The situation of energy supply after this development glooming, circular debt surges which could hamper energy generation in the coming months.

During May the previous PML-N government assured it would provide Rs25 billion out of total Rs50 billion, but the payment was never sanctioned. The previous government PML-N also levied consumers unfairly with more surcharges in order to cover their debt payments resulting in rising cost of electricity for consumers by Rs2.3 per unit.